Market-Based Monetary Policy Transparency Index, Risk and Volatility - The Case of the United States

Amir Kia () and Hilde Patron ()
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Amir Kia: Department of Finance and Economics, Utah Valley University
Hilde Patron: Department of Economics and Finance, Louisiana Tech University

No 04-07, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper extends the literature by developing an objective market-based index, which is dynamic and continuous and can be used to measure the monetary policy transparency for a country or, simultaneously, a series of countries. It was found that the more transparent the monetary policy is, the less risky and volatile the money market will be. Furthermore, during the tenure of Chairman Greenspan the volatility and risk in the money market fell. The policy regime changes of adjusting the target rate by multiples of 25 or 50 basis points and including a balance-of-risks sentence in FOMC statements also resulted in a reduction in volatility in the money markets.

Keywords: Monetary policy transparency; risk; volatility; money market (search for similar items in EconPapers)
JEL-codes: E43 E51 E52 E58 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2004-04
New Economics Papers: this item is included in nep-fin and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published: Carleton Economic Papers

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Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:04-07

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